• Thu
  • Sep 18, 2014
  • Updated: 1:43pm
Jake's View
PUBLISHED : Monday, 21 April, 2014, 11:52pm
UPDATED : Monday, 21 April, 2014, 11:52pm

Dirty money alarmism just doesn't wash

PwC's on-the-cheap survey says less about any real issues with money laundering in our neighbourhood and more about pleasing regulators


Jake van der Kamp is a native of the Netherlands, a Canadian citizen, and a longtime Hong Kong resident. He started as a South China Morning Post business reporter in 1978, soon made a career change to investment analyst and returned to the newspaper in 1998 as a financial columnist.

According to the [PricewaterhouseCoopers (PwC) survey on economic crime], 37 per cent of companies in Hong Kong and Macau - mainly banks and casinos - had experienced money laundering in the past two years. That figure compares with the global average of 11 per cent.

SCMP, April 20

Today a tale of two charts. The first one on the prevalence of money laundering was given some prominence in this newspaper on Sunday and shows us in a bad light indeed. Tsk, tsk ... we'll have to clean up our act.

The second one on the prevalence of general economic crime, which was taken from the same survey by this big accounting firm, shows us in a very good light indeed. Hey there, New York, you better clean up your act.

It's a matter of definition, of course, and PwC could define economic crime only by listing examples - fraud, corruption, cybercrime, etc (you know, like, bad stuff, like). Let it be. Our topic is the money laundering charge.

There are three things to take note of here. First is that bit in the excerpt above about "... and casinos". Why is Hong Kong to be lumped in with Macau when we have gone out of our way to keep casinos out? No way would Hong Kong come in at 37 per cent with casinos excluded.

Then there is the glaring anomaly that says only 4 per cent of companies in China, in contrast, have experienced money laundering in the past two years.


Come again?

Is this planet earth?

Throw this survey's whole section on money laundering into the bin, I say. Hey, you people at PwC, did you know that it takes two to tango? With whom did you think Hong Kong was doing this dance then?

But there is a reason for the anomaly. Our laws do not require proof of any underlying crime for conviction for money laundering. It is enough that money was handled in a way that might make others think it was laundered.

That's right. You can go to prison in Hong Kong for a long term, 10 years or more in some cases on record, because you looked shifty-eyed and didn't directly answer when you were asked: "Where did you get your money?"

It's true. Ask any lawyer. In money laundering you're guilty here unless proven innocent, a huge breach of civil liberties but one that produces big numbers in money laundering cases. Most, of course, consist only of commercial transactions that go around Beijing's capital flow restrictions.

Let's return to the PwC survey, however.

The presentation is as

glitzy as anything of this kind comes but dig a bit and you find the confession that in substance it "consisted of a globally accessible web-based questionnaire on a secure

site. Executives wishing to respond …"

They did it on the cheap. There was no control of the survey population, no way to determine response rate. This is a distinctly unprofessional way to conduct a survey and invalidates all the results.

But it is sure to please supervisory regulators. In school we used to call that sucking up to the teacher.



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This article is now closed to comments

Mr. Van Der Kamp:
We must resist enforcing other countries' money laundering laws at all costs if we want to maintain a competitive advantage for HK financial industry.
Every nation has its own set of tax statutes. Tax arbitrage is fair game. It is widely practiced by corporations in an open global economy.
The only time money laundering becomes a problem is when money transfers have origins in criminal activities. Even then, we should only consider sharing confidential financial information if criminality can be established within HK jurisdiction. However, such issues should be negotiated through a treaty in which reciprocity of mutual law enforcement is a prerequisite.
Our judiciary resources are not a free lunch to US and EU bullies.
Closer to home, we must maintain the financial and statutory integrity of our one country two systems.
Few exceed the blatant, high profile case well known to all Hong Kongers than the series of dubious fund transfers from Mr. Lai Chee Ying to Cardinal Zen and Mrs. Anson Chan. What are these moneys for? When tens of millions are involved without some transparent business transactions or charitable donations, which must be accounted for when and how such gifts are dispensed, shouldn't these dealings be considered as potentially nefarious, illegal quid pro quos?
All law enforcements are selective. We must prioritize judiciary and enforcement resources and not serve as lackeys to foreign tax collectors chasing after their tax dodgers.
'Anti-money laundering and counter-terrorist financing is everyone’s responsibility. When you come across any property, which you know or suspect to be drug or crime proceeds or terrorist property, you should make a suspicious transaction report (STR) to the Joint Financial Intelligence Unit (JFIU). However, some sectors will have a greater risk of coming across crime proceeds or terrorist property than others, e.g. practitioners in our financial markets, remittance agents, money changers, money lenders, estate agents, trust and company service providers, jewelers, accountants, lawyers, etc. Taking an indifferent attitude or turning a blind eye to a transaction you know or have reasonable grounds to believe that crime proceeds/terrorist funds are involved may result in your conviction for the above offenses. Failing to report knowledge or suspicion of crime proceeds or terrorist property is a criminal offense. If you go on to deal with such property knowing or having reasonable grounds to believe that the property is crime proceeds, then you may have committed the offense of money laundering.'
I can just see all the lawyers, jewelers, estate agents, Trusts, brokers, taxi licence holders queuing up to dob them in (Not)


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